Houston is a hot market for property investors, and more homes are being turned into rentals, vacation homes, and income properties.
When you invest in properties either as a side business or a full-time gig, you’re always looking for ways to cut costs. The less money you spend, the more you make.
Many property investors choose to self-manage their properties instead of hiring property managers as a key strategy for cost-cutting. There are financial advantages to doing so from the start, but it comes with its own set of risks.
Here are some key dangers you’re facing when you try to manage your own properties.
Weak Lease Agreements
It’s not uncommon for amateur landlords to download a template from the internet when writing lease agreements. This might work for a while—until you have a tenant who knows how to push your buttons.
A bad tenant can poke holes in any lease agreement, and when you try to take legal action, your lease agreement won’t hold up. You can’t always guarantee that you’ll have good, rule-abiding tenants in your properties, making the lease agreement one of the most important documents.
Evicting tenants and soliciting payment for repairs comes with the territory of being a landlord, and you need a strong lease agreement to protect you. A property management company will have this covered, releasing you of excess liability.
Here’s another dangerous mistake beginning landlords make: They fail to bank the deposit and rent money properly. In dire circumstances, mistakes of this caliber could lead to legal repercussions, including jail time.
First and foremost, the tenant’s security deposit cannot be stored in the same account as your personal funds or rent payments. It must be in its own trust account, which is significantly easier to manage under the direction of a property management company.
Additionally, rent funds should not be deposited into your personal bank account, even if you only have one investment property. It’s much cleaner and legally safer to deposit rent payments into a separate account before withdrawing the profits. Once again, this is most easily accomplished with a property management go-between.
It might seem simple to fill your units with excellent tenants, but that’s not reality. As a DIY landlord, you’ll soon learn how easy it is to misread people at the beginning and end up with tenants who trash your place, fail to pay the rent, and ignore your eviction notice.
There are plenty of excellent renters out there, but without a tried and true tenant screening process, you may never find them. Additionally, you don’t have the time to perform all the due diligence required to make sure a tenant is the right fit, including criminal background checks, income verification, and more.
Find a property management service that will do the tenant screening for you. Trust their process, as it’s helped countless investors fill their properties with excellent tenants.
Stress and Poor Time Management
Many investors like real estate because they’re basically making money in their sleep. But this is only true if you’re not doing the landlord duties yourself. If you are, you’re answering maintenance requests, handling landscaping, letting tenants in at 3 a.m., and screening potential tenants for hours on end.
Suddenly, your key to passive income becomes an additional job on top of your other investments and your day job. Within a short amount of time, you’ll become overwhelmed with stress and the inability to properly manage your time.
Property managers remove all this stress for you and turn your income property into true passive income. You can pay an affordable monthly fee and worry about nothing at all while your rent payments show up on time month after month. This gives you the time to go after other investments and broaden your portfolio.
When you become overwhelmed and stressed, you’re likely to shirk some of your landlord responsibilities. You might become less available to tenants and respond much slower to maintenance requests.
Word about a bad landlord spreads a lot faster than you might think. Houston is a huge city, but word gets around. Renters often ask about their landlords before they sign a lease agreement.
Famed investor Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” In your case, doing things differently means hiring a property manager from the beginning.
You don’t want your reputation as a property manager and real estate investor to become damaged before you’ve really had a chance to begin. It only takes one bad mistake to tarnish your reputation.
Property management companies are not infallible, but if they make a mistake, you can justifiably blame the institution rather than yourself, which goes over much better for tenants. To be safe, always screen your property management company thoroughly to keep mistakes at a minimum.
Contact Green Residential to Manage Your Houston Properties Today!
By this point, you’re probably at least considering the idea of hiring a property manager for your income properties. You won’t regret that decision if you hire Green Residential.
Our property management team boasts more than 30 years of experience serving income properties all over the greater Houston area. We cover tenant screening, property leasing, eviction services, maintenance, inspections, vacant home services, and so much more. In other words, you won’t have to lift a finger with us on the job.
We’re leading the industry in response times, and our affordable flat rate management fee is unparalleled throughout Houston. We also have a 24-hour support line available, so you won’t be getting any of those 3 a.m. calls!
We’re confident that you’ll love our services, but we offer a no-obligation contract for your convenience. To learn more about what Green Residential can do to make your life easier, contact us today!